Austerity and Social Protest

by Henry on August 10, 2011

I’ll leave those who are better qualified than I to argue about the econometrics, but the timing of this paper’s release is extraordinary.

Expenditure cuts carry a significant risk of increasing the frequency of riots, anti-government demonstrations, general strikes, political assassinations, and attempts at revolutionary overthrow of the established order. While these are low- probability events in normal years, they become much more common as austerity measures are implemented. … We demonstrate that the general pattern of association between unrest and budget cuts holds in Europe for the period 1919-2009. It can be found in almost all sub-periods, and for all types of unrest. Strikingly, where we can trace the cause of each incident (during the period 1980-95), we can show that only austerity-inspired demonstrations respond to budget cuts in the time- series. Also, when we use recently-developed data that allows clean identification of policy-driven changes in the budget balance, our results hold.

Maybe it is too early in the morning in California, but I’m confused about “Strikingly, where we can trace the cause of each incident (during the period 1980-95), we can show that only austerity-inspired demonstrations respond to budget cuts in the time- series. ” Is there some reason to believe that civil rights inspired demonstrations would respond to budget cuts? Or non austerity-inspired demonstrations?

In this context, it’s worth observing for the US that extended unemployment benefits are due to expire at the end of 2011, and extensions to TANF have already expired (and the number of recipients has remained unchanged since the recession, way below pre-reform levels). The only program still growing is food stamps (46 million recipients in May), and the Ryan budget proposed a 20 per cent cut.

Even assuming food stamps are preserved, they will be the only income source for tens of millions of Americans in the near future (the NYT estimated 6 million a year or so ago when most of the unemployed could still get UI).

Still, crime remains low and there hasn’t been any real protest. But, except for some students, that was true in England a week ago.

I haven’t read the paper (too weary to pursue something like that at this time of night), but I wonder if it distinguishes between different kinds of austerity. Specifically, I have in mind WWII and its aftermath in the U.S., G.B…. My grandparents and my parents (both born 1918) and their generation told many stories about the Great Depression, the war years, the aftermath, and I’ve read a lot about those years in G.B. (which seems not to have emerged from post-war austerity till, well, the Beatles and Twiggy). WWII may have brought about virtually full employment and an end to food lines and such, but it also required an enormous degree of austerity (those rationing books, for starters — and in GB, rationing continued well after the war), not to mention very profound anxiety and some pretty crazy behaviors (a lot of rushed marriages, for instance — or not, since the prospect of doom meant that sexual mores loosened up quite a bit). But NOT riots (in fact, the socialist momentum of the 30’s was waylaid by the war — and by its aftermath, another story).
All I’m getting at: an austerity that is endured in the service of a collective cause and shared by all (not that all distinctions of wealth disappeared at home during the war, of course — but rich parents lost sons as poor parents did, and everyone “pitched in” in his or her own way — in GB, whole aristocratic estates got given over to the war cause — WWII was not WW I for the British) is very different from austerity that seems to ask for “sacrifice” only by the largest number of people, while a tiny elite vacations in Tuscany.
I like to think it shouldn’t have to take an external enemy like Hitler to rally people to a common cause. But that’s another issue. Just wondering if this study distinguishes between types of austerity of the kind I’m pointing to.

Gary Sauer-Thompson points us to the “Broken Britain” article (24/1/10) where The Guardian says (among other things): “By some measures, Britain is in better social shape than ever. The government points to falling crime rates, a trend confirmed by figures published last week.

“The average person is less likely today to be robbed, burgled, assaulted or murdered than a decade ago. But the statistical average conceals pockets of real social decay…”

This is a bit old, but typical of middle-class opinion. Only violent crime or theft of goods are really crimes. Fraud isn’t. So in the aftermath of the riots, we get violent denunciations of “criminal behaviour” which were notably absent when the lies and cheats in the international financial system were brought to light by the GFC.

From the US, here’s a little essay about why that sort of criminal behaviour was never punished. I would imagine the situation in the UK would be parallel:

in the aftermath of the riots, we get violent denunciations of “criminal behaviour” which were notably absent when the lies and cheats in the international financial system were brought to light by the GFC.

Yeah, the Guardian never said a word about malfeasance in the financial sector.
Good grief, it’s like you don’t know anything at all about Britain!

From the US, here’s a little essay about why that sort of criminal behaviour was never punished. I would imagine the situation in the UK would be parallel.

I wonder what George Will thinks of this paper (i.e.. conservatism loves social stability)?

Conservatives don’t want society to stay stable so much that they’ll stop taking wealth from it; they want society to stay as stable as possible consistent with their taking as much wealth as possible from it.

I expect if they learn lessons from that paper, it won’t be “so that’s the point at which riots happen! Should we stop before that point?”; it will be “so that’s why riots happen at that point! Can we change conditions so we can push the riot point further away?”

But Quiggin is correct. Violent crime in the US is at a decades low level, which is what I assume was meant by “crime.” Financial crime may be at a high point (who knows in the absence of prosecution) but while people get angry at fraud, insider trading, and other money fiddling, it’s not the same as the fear of being beaten, raped, or murdered.

Also, a worker’s life leached of all the wealth that should have come to him for the work he did, is a life at least half murdered. Enough of those should count as a murder equivalent, and there are millions of them.

In a sense the riots in the UK were directly caused by the austerity regime. The week before, youth centeres in Haringey were shut down due to government forced spending cuts. Which is probably the best illustration of how successful these cuts are likely to be at saving money.

One of the most striking things in all this is how out of touch the media are. Lots of commentators talking about how the budget cuts haven’t hit yet. No, they haven’t hit middle class people yet.

I certainly did not mean to minimize the direct and collateral damage of financial crime. Those crimes are grossly under prosecuted and when convictions result, the sentences less severe than crimes of personal violence. They do not, however, generate the immediate, more visceral fear of physical assault. My point was that this difference does have an impact on how financial crimes are viewed versus assaults.

The paper finds that there is no significant relationship between austerity and social instability in the period 1990-2009. See page 15 et seq.

Not that the paper does a good job noting this rather crucial exception. The authors write We demonstrate that the general pattern of association between unrest
and budget cuts holds in Europe for the period 1919-2009. It can be found in
almost all sub-periods, and for all types of unrest. And that’s true, but “almost all sub-periods” means here “3 out of 4,” and the exception turns out to be the last 20 years.

In some ways, actually, the paper could count as evidence against the thesis that government cuts caused the riots.

You certainly wouldn’t count the absence of austerity-related riots for decades as evidence in favor of the hypothesis that austerity caused the recent riots.

And if a study of riots over the last two decades fails to find a statistically significant relationsip between riots and austerity measures, then that bolsters the case that austerity may not be responsible for the most recent riots. Is it remotely conclusive, or even persuasive, on its own? No.

Andrew F. – I don’t think anyone is arguing that austerity _caused_ the recent riots (at least, certainly not me). The question is whether austerity makes such riots more likely. But more on point – there seem to me to be three ways of explaining this. One – that the entire relationship is a spurious one. Two – that there has been for some reason a long term phase change in the relationship, that occurred in 1990 or thereabouts. Three – that there has been a shift, but a less permanent one, such that the absence of a relationship in the last period does not predict what is happening post 2009 (and in particular from 2010 on, which is when austerity measures began to kick in in a number of countries). Off-the-cuff observation would seem to suggest that there has been a significant relationship between cutbacks and social unrest across a number of countries in the last fifteen months, suggesting that Three is at least plausible (obviously it can’t do more than that without proper research). And distinguishing between Two and Three requires some understanding of the causal mechanism underlying the change between pre- and post-1990. Tyler Cowen picks up on the E. Europe revolution suggestion – but I’m not at all clear what the proposed mechanism is here, and how it might work. More plausible to me is the expansion of credit markets over the 1990s and 2000s, which provided a buffer for individuals against economic shocks, hence making them less likely to engage in counter-system protests etc. And if (and it is an if) this, or something like it is the mechanism at work, then one might expect the contraction of individual credit, when combined with fiscal austerity measures, to result in greater propensity to unrest. This hypothesis, if it has explanatory value, would plausibly explain some variation within the 1990-2009 period, as well as after – one might expect national level indices for access to credit to be correlated negatively with social unrest during times of cutback. Not that I’m proposing to do the econometrics myself, mind you…

I largely agree Henry, though I’m undecided on the credit hypothesis as an explanation for the lack of significant relationship post-1989. I only skimmed the article, and while it strikes me as a good contribution and a worthwhile start, I also think they rely on units of analysis that are simply too large. For example, who is rioting? Who is organizing the protests? To what extent do the riots begin with organized protests that then get out of control? Do we also see a stronger reliance on private industry and less of a reliance on government transfer payments and employment after 1989 (which would tie in with the credit hypothesis)? Have the size and sophistication of police forces changed? To what extent is the decline in social unrest also correlated with a decline in violent crime? What happens when we exclude certain countries from the analysis?

The paper is very suggestive, but I found myself wanting more depth of analysis. It reminded me of a little book by the RAND Corp. on the relationship between economic contraction and the probability of a coup. A good view from 40,000 feet, but only a starting point if you want to know what’s going on in a particular case.